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Raytheon: Corporate Rap Sheet

Raytheon

By Philip Mattera

Raytheon is essentially a missile supermarket. It sells Sidewinder air-to-air missiles, Maverick air-to-ground missiles, Patriot surface-to-air missiles, Tomahawk submarine-launched cruise missiles and other kinds of deadly projectiles. The company also supplies the Pentagon with science-fiction-sounding weapons such as the Exoatmospheric Kill Vehicle and Kinetic Energy Interceptors as well as a variety of the electronic components that are so prevalent in modern warfare.

Raytheon made its name producing radar systems during the Second World War. After the war and for the following five decades, the company tried its hand at numerous civilian businesses such as computers, semiconductors, microwave ovens, textbook publishing, and small airplanes, but it eventually dropped out of them all and now focuses virtually all its attention on serving military customers. Thanks to a series of acquisitions in the 1990s and a steady stream of new contracts, it is now one of the largest Pentagon contractors.

One of the biggest controversies concerning Raytheon has been its production of the Joint Standoff Weapon (JSOW), which was used as a delivery vehicle for cluster bombs, the weapon widely condemned because of its devastating impact on civilians. The company has also been the target of protests over its role in producing controversial drone weapons.

Government Contracting

In the late 1980s Raytheon was one of numerous military contractors targeted in the wide-ranging corruption probe by Henry Hudson, a U.S. Attorney in Virginia. In March 1990 the company pleaded guilty to trafficking in classified Pentagon budget documents and paid civil and criminal fines of $1 million.

In 1994 Raytheon paid $4 million to settle charges that it overbilled the Pentagon for an early-warning radar system.

In 1997 Raytheon and its former Amana unit agreed to pay $10 million to settle a class-action lawsuit contending that Amana sold defective furnaces and water heaters.

In 1998 Raytheon paid $2.7 million settle allegations that it improperly charged the Defense Department for expenses incurred in marketing products to foreign governments.

In 1999 Raytheon paid $400,000 to settle claims that it overcharged the Defense Department on an aircraft maintenance contract.

In 2000 Raytheon agreed to pay the federal government just over $1 million to resolve quality-control issues on various electronic devices sold to the Pentagon. The company had voluntarily reported the problems after discovering “testing anomalies.”

In 2003 Raytheon agreed to pay $3.9 million to settle charges that its aircraft division overbilled the Defense Department when invoicing the cost of liability insurance. At the same time, the company disclosed that the SEC was investigating fraudulent accounting practices at the aircraft unit. More than three years later, the company finally settled the matter by agreeing to pay a penalty of $12 million.

Also in 2003, Raytheon agreed to pay a $25 million civil penalty to resolve State Department charges that the company violated export controls by selling military communications equipment to Pakistan through its Canadian subsidiary.

In a rare rebuke by a company to its chief executive, Raytheon announced in 2006 that it was denying William Swanson an annual raise and reducing his stock award. The move, which reportedly cost the CEO about $1 million, came after it was discovered that Swanson had apparently engaged in plagiarism in the preparation of his book Swanson’s Unwritten Rules of Management.

Environment and Product Safety

Raytheon is associated with a number of toxic waste sites, including those resulting from production facilities that contaminated ground water with substances such as the carcinogen trichloroethylene (TCE). These include sites in areas such as Tucson and St. Petersburg, Florida.

The St. Petersburg situation, where an underground plume of toxic waste was reported to be migrating toward Boca Ciega Bay, has been especially controversial. In 2008 two class action lawsuits were filed against the company on behalf of local residents. The company brought in experts who insisted the plume did not pose a health risk, but that did little to allay anger in the Azalea community. Raytheon later agreed to carry out a cleanup plan that received state approval in August 2012.

Labor

In the United States, most of Raytheon’s unionized workers are members of the International Brotherhood of Electrical Workers (IBEW) and the International Association of Machinists (IAM). Members of IBEW Local 1505 in Massachusetts struck the company for five weeks in 2000 before approving a new four-year agreement.

IAM members at Raytheon’s civil aircraft operation in Wichita, Kansas responded angrily to a 2003 report that the company planned to outsource wire harness work. Despite launching a pressure campaign, the union could not stop the transfer of work. Two years later, IAM District 70 members rejected what the company called its final contract offer, which went into effect when two-thirds of the membership failed to approve a strike vote.

In 2003 members of IAM Local 933 at its Raytheon Missile Systems in Arizona voted to strike in response to a company proposal to raise worker healthcare costs, but a compromise was approved at the last minute. In 2006, however, the local did walk out, staying on strike for ten weeks before reaching agreement with the company on a new contract.

Tax Issues

In his book The Great American Jobs Scam, Greg LeRoy describes how in the mid-1990s Raytheon threatened to move its extensive operations out of Massachusetts unless the state provided substantial tax breaks. The state caved in, and Raytheon ended up saving about $21 million a year.